The age of data reporting in the financial sector

Wednesday 11 July 2018

Client Services Director at Equiom Jersey, Jo Gorrod is responsible for ensuring the highest levels of customer service in line with compliance procedures and external regulatory requirements. Having spent more than 20 years serving clients in the local financial services sector, Jo discusses developments in the sector and specific technological advancements that could benefit both businesses and clients.

It has been quite an eventful year for the financial services sector. From the Paradise Papers to Brexit, we face a number of challenges as an offshore financial centre. But the Channel Islands still prevail with employment in the private wealth sector remaining healthy and an untarnished reputation for compliance. Providing information to relevant authorities is an increasingly common practice given the quest for global transparency and this continues to be a growing burden on the financial sector.

UK trust register and pressure for a public register of companies

With the introduction of a UK trust register, we are now required to report on beneficiary information for a number of structures with UK-related assets. The initial concept of a trust register actually breaches basic trust principles by releasing information about contingent trust beneficiaries where, in many cases, they are only named in a letter of wishes. These potential beneficiaries have a right to confidentiality as they have no interest in the assets in question. Recent interpretations of the legislation have deemed this to be incorrect and HMRC’s latest guidelines have clarified that these potential beneficiaries do not need be reported until they have benefitted.

While this is good news, the prospect of a public register of beneficial ownership of companies for Crown Dependencies still looms. Making such information public could breach confidentiality and basic rights to privacy. While the Channel Islands are not legally required to sign up to a public register, the increasing pressure from the government to do so is creating serious tension between data protection and transparency. The fact still remains that this is a contentious issue, but by remaining strong and playing to our strengths, the Channel Islands are well-placed to maintain a good balance between compliant confidentiality and adherence to external reporting standards. In fact, we are seeing within our industry more and more clients turning to the Channel Islands because of our compliant status and recognition as a leader in terms of regulation. They want the status of a gold standard jurisdiction on a basic and practical level as the majority of our clients are transacting cross-border, making it easier to do business internationally.

The emergence of Regtech

Given the Channel Islands’ position as a leader in compliance, the next logical step is to build on this expertise through the application of fintech. The marriage of technology and compliance to provide solutions in the due diligence and anti-money laundering (AML) arena is of great interest as it potentially improves the efficiency for businesses and simplifies the burden on the individual.

The requirement to hold certain information on clients is becoming greater and, with this increasing obligation, the need for a central platform is even stronger. Regtech, although a relatively new term, has been considered for years since the introduction of financial technology. It is the term used to describe technological solutions in compliance for due diligence and it is becoming more and more popular among businesses in our space.

Regtech AML solutions are leveraging distributed ledger technology to provide a central platform for due diligence. The idea is that it will simplify access to data by holding it all in one place so that the client will only need to supply data once, and businesses will be able to access that data centrally. This could result in significant time and cost saving for businesses and individuals who, at present, need to provide information separately to each counterparty they transact with. This is not only a duplication of effort but also means that information is held on multiple systems meaning that the potential exposure to data breaches is greater.

Regtech: where are we now?

The use of Regtech in the financial services sector is already firmly on the agenda for both Jersey and Guernsey governments, which have both invested in this area establishing Digital Jersey and Digital Guernsey. The regulators are taking positive steps as well, looking into the possibility of employing digital systems for customer identification requirements associated with AML and counter-terrorist financing (CTF). These advancements are positive for both businesses and clients as we look to develop and streamline our processes where due diligence is concerned. The ability of the regulator to agree a standardised approach to digital ID solutions would create a competitive advantage for our jurisdictions.

However, Regtech is not there just yet. While we are gradually moving forward with approval for the use of digital signatures and electronic verification, there is still further work to do. The regulators must accept Regtech as a safe and viable solution and to do so need to take into account the full impact on issues such as data protection and cybersecurity. Rather than looking forward to immediate implementation, the sector is expecting to see material change to the way we do business within the next three to five years.

The future for fintech

There are other areas in which we would benefit from Regtech as well as alternative emerging technologies. In the Channel Islands, we are required to report certain information to the National Risk Assessment, including high level information on the make-up of our client base for CTF and AML purposes. The automated reporting required presents another opportunity for streamlining processes and making business more efficient.

The efficiencies brought about by the increasing digitisation of the industry will affect future business models and employment trends. Whilst I do not foresee trustees being replaced by robo-advisors in the near future, businesses need to be prepared to adapt and modernise. At Equiom, we are excited for the prospects as we move towards a more technologically advanced financial future.


If you would like to discuss any of the above topics, contact Jo Gorrod, jogorrod@equiomgroup.com

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken, or not taken, by anyone in reliance on the information in this article or for any decision based on it.